Traders in the US equity options market are bracing for a substantial movement in Nvidia's shares following the upcoming earnings report of the leading artificial intelligence chipmaker.
Analysts suggest that Nvidia's earnings report, scheduled for release on February 21, could trigger an extraordinary shift in the stock's value, with expectations indicating a potential swing of approximately 11 per cent in either direction.
This move stands out as the most significant projection made by options traders in the past three years, signalling heightened volatility on the horizon.
According to Matt Amberson, the founder of options analytics service ORATS, the predicted swing in Nvidia's shares is substantial, considering the company's market capitalization of $1.8 trillion.
A movement of this magnitude could result in a market value shift of approximately $200 billion, surpassing the market capitalisation of prominent entities like Intel Corp and exceeding that of around 90 per cent of S&P 500 constituents.
The anticipation surrounding Nvidia's earnings is reflected in the options market activity, with over 750,000 Nvidia options exchanged by early Thursday afternoon, making it one of the most actively traded single stock names in the options market.
Despite the significant upward trajectory of Nvidia's stock, there remains considerable demand for upside options bets, as indicated by the stock's 90-day 25 delta call skew, which is near a five-year high.
Christopher Jacobson, a strategist at Susquehanna Financial Group, highlighted the significance of the elevated call skew, suggesting that investors continue to perceive substantial upside potential in Nvidia's stock.
This sentiment persists despite the recent surge in volatility, with many investors turning to upside calls for lower-risk exposure amid the uncertainty.
Nvidia's recent performance underscores its growing prominence in the market, as the company surpassed Google-parent Alphabet to become the third most valuable US company.
Analysts are optimistic about Nvidia's earnings prospects, with expectations pinned on earnings of $4.56 per share and a substantial rise in quarterly revenue to $20.378 billion compared to $6.05 billion a year ago, according to estimates from 33 analysts.